Nissin Foods projects drop in 2024 earnings, blames Chinese subsidiary
CHINA – Hong Kong-listed Nissin Foods Company Ltd., part of Japan’s Nissin group, has issued an earnings alert after the Chinese New Year holiday, projecting a year-on-year drop of between 38% – 41% in its net profit for 2024.
The company blamed the profit drop on the falling value of fixed assets, such as plant, machinery and distribution networks in Hong Kong and mainland China. It also attributed the drop to one-off items on its books resulting in impairment charges of around US$16.7M – US$18M for the year.
The company, which is famous for various brands such as Demae Ramen, Cup Noodles and UFO Fried Noodles, said it expected its annual profit to range between US$25 million and US$27M when the finalized figures are released in March.
Overall earnings for the year were forecast to be in the range of US$77.8M – US$79M, using the EBITDA measure, on a par with US$78.1M in 2023.
The company’s share price rallied slightly after the statement came out on February 5 but was still languishing in loss territory for the year to date.
The company included further earnings figures for its Japanese parent company, Nissin Foods Holdings Co. Ltd., which indicated that underlying revenue from China was trending higher, excluding factors such as currency fluctuations.
In the first three quarters of last year, revenue from the China division rose 9.6% to US$357M, but operating profit fell by 47% to US$18.9M in a drop attributed to foreign exchange factors.
Excluding currency effects, operating profit grew 3.1% from the same period a year earlier while core operating profit slid 5.6% to US$33.7M, the company said.
Nissin Foods appears to be keen to show that baseline income from Chinese food sales is holding up despite the steep drop in net profits, which was blamed on charges related to non-core assets within its complementary or distribution businesses.
As a huge consumer of instant noodles, China accounts for a major chunk of Nissin revenue. In the first half of 2024, the mainland business contributed 61.3% of the group’s total revenue.
However, the numbers over recent years show that Nissin products have been losing momentum in the Chinese market as consumers have developed a taste for rival brands.
Revenue growth in China slowed to 14.3% in 2021 and decelerated further to 2.1% in 2022, before sales actually fell 5.3% in 2023. Last year, revenue returned to a growth track.
China’s weak economic recovery since the pandemic has affected consumption patterns for the Nissin range of food products.
Sales of Cup Noodles have grown modestly in inland areas of mainland China, while sales of bagged noodles in Hong Kong have remained stable, but sales of frozen food products have fallen, the company said.
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